The “Sinking Fund Gap” – What Strata Managers Need to Know Before the Next Quote Lands

WA Sponsor Articles
2 days ago
5 min read

If you manage schemes with Capital Works Fund plans completed before 2023, there's a good chance the cost assumptions in those plans no longer reflect the market your clients are buying into today.

This isn't news to most experienced strata managers — you've been fielding the phone calls when quotes come back higher than expected. But having the data to frame that conversation with committees makes all the difference between a reactive scramble and a well-managed process.

Here's where the numbers stand, and what you can do across your portfolio now.

The data: what's actually happened to costs

According to Master Builders Australia, it is now 44.8% more expensive to build a new home than it was just before the pandemic. Building material costs have surged 37.9% over the same period, with concrete, cement, and sand products alone rising 5.0% in the most recent year. The September 2025 quarter saw the biggest cost jump since December 2023 (MBA, October 2025).

The Cordell Construction Cost Index (CCCI) tells a similar story. Cumulative residential construction costs rose approximately 31% over the five years to mid-2025 (CoreLogic/Cotality, Q2 2025 Report). And while the annual pace of CCCI growth eased to 2.9% by mid-2025, the most recent data signals costs are re-accelerating. Master Builders reported the biggest quarterly cost jump in nearly two years in the September 2025 quarter, and Rider Levett Bucknall's Q4 2025 Construction Market Update forecasts 4–6% cost escalation across major Australian cities in 2026.

While these indices track new house construction rather than strata-specific works, they reflect the same labour market, material costs, and trade availability that drive common property maintenance and capital works pricing. The gap between what was forecast and what it now costs to get work done is real — and it's showing up in quotes across the industry.

Where this hits your clients

You've likely already seen it. A committee that budgeted responsibly based on a forecast prepared three or four years ago now finds the numbers don't add up when they go to market. The plan was sound when it was written — the market simply moved faster than anyone anticipated.

The practical impact is a funding shortfall at the point a scheme needs to commit to work. In a 20-lot scheme, a 40% cost increase on a $200,000 project creates an $80,000 gap — that's $4,000 per lot that wasn't in anyone's planning.

For strata managers, this creates pressure from multiple directions. Committees want to know why the fund isn't enough. Owners push back on special levies in a cost-of-living environment where the ABS is reporting the CPI Housing group up 5.5% year-on-year and headline inflation at 3.8% in December 2025. And deferring the work only makes things worse — costs keep rising, building condition deteriorates, and insurance and compliance risks grow.

Why levies haven't kept pace

It's common for committees to approve levy increases of 3–5% annually. For administrative costs — insurance, management fees, cleaning — that may have been adequate. But the trades and materials required for major capital works were on a completely different inflation curve.

The Housing Industry Association (HIA) estimates that an additional 83,000 tradies are needed just to meet the National Housing Accord target — a 30% increase on the current residential trades workforce. Government infrastructure spending, including defence, energy, and Olympic-related projects, is pulling trades away from private and strata work. Rider Levett Bucknall notes that house and apartment completion times have increased by around 40% since pre-pandemic.

The result is that schemes running modest annual levy increases have seen their Capital Works Fund shrink in real terms — even as the balance on paper kept growing.

How strata managers can get ahead of this

The managers who come through this period well will be the ones who raised it with their clients early — not the ones who waited for the quote to land and then had to explain the shortfall.

Flag the risk across your portfolio. Look at which of your schemes have Capital Works Fund plans older than 24 months, and which have major projects approaching in the next two to three years. Those are the schemes most likely to encounter a gap when they go to market.

Recommend a forecast refresh. Where plans are dated, suggest that committees engage their preferred supplier to update the forecast with current pricing. Framing this as routine good governance — not a criticism of the original work — makes it an easier conversation. The market has shifted faster than anyone expected, and plans prepared in a different cost environment simply need refreshing.

Prepare the committee for the conversation. When updated numbers reveal a shortfall, committees will look to you for guidance on what comes next. Being ready to walk them through the range of options available — and the trade-offs of each — positions you as the person who saw this coming and had a plan.

Don't let schemes defer essential work. RLB has identified a 6–12 month window where well-prepared projects may secure favourable tender conditions before capacity tightens again from late 2026. Schemes that are ready to move when trades are available will get better outcomes than those that wait.

Funding options your clients should know about

When a scheme has essential work to do and the Capital Works Fund falls short, there are several approaches committees typically consider — from special levies and accelerated savings plans to strata funding facilities, or some combination. Each comes with trade-offs around timing, cost, owner impact, and meeting approval requirements.

Your role isn't to recommend a specific path, but committees will value a manager who can lay out what's available and help them understand the implications. Being across the options before they're needed is part of managing the scheme well.

If you're managing schemes with upcoming capital works and expect the fund may fall short, we're here to help. StrataLoans works with strata managers across Australia to ensure Owners Corporations can access funding when essential work can't wait — even when the budget was set in a different market. Get in touch with our team for an obligation-free conversation about how we can support your clients.

This article provides general information about strata finance in Australia and is not financial, legal, or engineering advice. Strata managers should encourage their clients to seek independent professional advice tailored to their specific circumstances. StrataLoans does not provide individual financial advice. StrataLoans is a product of StrataCash Management Pty Ltd ABN 44 124 400 924 Australian Credit Licence 323823. Terms and conditions and fees and charges apply. Approval and loan amount are subject to our credit assessment criteria.

Source references

Master Builders Australia, Building cost pressures near 2-year high, October 31, 2025 — 44.8% cost increase since pre-pandemic; 37.9% material cost surge; concrete/cement/sand +5.0% annually.
Housing Industry Association (HIA), All Hands on Deck report, October 2024 — 83,000 additional tradies needed to meet the Housing Accord target; 30% workforce growth required.
Master Builders Australia, Labour shortages and housing costs drive cost of living spike, January 2026 — CPI surged to 3.8% in December 2025; CPI Housing group +5.5% YoY.
CoreLogic/Cotality, Cordell Construction Cost Index (CCCI), Q2 2025 & Q4 2024 Reports — ~31% cumulative construction cost increase over five years.
Rider Levett Bucknall (RLB), Q4 2025 Australia Construction Market Update, December 2025 — 4–6% escalation forecast for major cities in 2026; 6–12 month window for well-prepared projects; completion times up ~40% since pre-pandemic.
WT, Australian Construction Market Conditions Report, June 2025 — National building cost escalation forecast at 5.3%; infrastructure costs at 5.1%.
Altus Group, Q3 2025 Australian Construction Price Outlook — Electricity prices up 23.6% annually; energy-intensive materials as cost flashpoints; relief unlikely before 2028.

This article is bought to you by SCA (WA) sponsor StrataLoans.